Kokusai Electric trims indicative IPO pricing about 3%

Kokusai Electric, the Japanese chip equipment maker, has made a strategic decision to trim the indicative pricing for its upcoming initial public offering (IPO) by about 3%. The move comes as a response to the lackluster performance of chip designer Arm, which recently went public. By adjusting the indicative price range to 1,830-1,840 yen per share, down from the previous 1,890 yen, Kokusai aims to align with the sentiment of institutional investors and the current state of the stock market.

One of the factors influencing this decision was the subdued share price performance of SoftBank Group’s Arm since its listing last month. However, Kokusai remains optimistic about its IPO prospects. If the offering prices at the top of the range, the company will raise approximately 108.3 billion yen ($729 million) and achieve a market valuation of 423.9 billion yen, excluding an overallotment.

Kokusai Electric, backed by private equity firm KKR, specializes in manufacturing machines that deposit thin films on silicon wafers. The company’s largest customers include tech giants Samsung Electronics, TSMC, and Micron Technology, which collectively account for more than 40% of its revenue. Despite the current slump in the smartphone and personal computer markets, investors are closely monitoring the outlook for chip demand, particularly in relation to the growing investment in artificial intelligence.

In a positive development, Kokusai has received commitments from Capital Research and Management as well as Lazard Asset Management to purchase shares at the offer price. This demonstrates confidence in the company’s future prospects and underscores the potential value it holds for investors.

While the chip industry faces challenges, such as the slow recovery of rock-bottom memory chip prices, companies like Samsung and Micron continue to innovate and adapt. Samsung, which is expected to report an 80% profit slump in its upcoming quarterly earnings, remains a key player in the market. Micron, despite forecasting a quarterly loss, is actively pursuing opportunities in the evolving chip landscape.

As Kokusai Electric prepares for its IPO, it is clear that the company’s decision to adjust its pricing strategy is a prudent move to ensure investor interest and market success. With strong partnerships and a focus on cutting-edge technology, Kokusai is well-positioned to navigate the dynamic chip industry and deliver value to its stakeholders.